How Should Investors React To Opthea Limited's (ASX:OPT) CEO Pay?

Megan Baldwin has been the CEO of Opthea Limited (ASX:OPT) since 2014. First, this article will compare CEO compensation with compensation at similar sized companies. After that, we will consider the growth in the business. And finally - as a second measure of performance - we will look at the returns shareholders have received over the last few years. This method should give us information to assess how appropriately the company pays the CEO.

Check out our latest analysis for Opthea

How Does Megan Baldwin's Compensation Compare With Similar Sized Companies?

Our data indicates that Opthea Limited is worth AU$503m, and total annual CEO compensation was reported as AU$943k for the year to June 2019. While this analysis focuses on total compensation, it's worth noting the salary is lower, valued at AU$414k. As part of our analysis we looked at companies in the same jurisdiction, with market capitalizations of AU$325m to AU$1.3b. The median total CEO compensation was AU$1.3m.

So Megan Baldwin is paid around the average of the companies we looked at. Although this fact alone doesn't tell us a great deal, it becomes more relevant when considered against the business performance.

The graphic below shows how CEO compensation at Opthea has changed from year to year.

ASX:OPT CEO Compensation, March 18th 2020
ASX:OPT CEO Compensation, March 18th 2020

Is Opthea Limited Growing?

Opthea Limited has reduced its earnings per share by an average of 18% a year, over the last three years (measured with a line of best fit). In the last year, its revenue is down 19%.

Sadly for shareholders, earnings per share are actually down, over three years. And the fact that revenue is down year on year arguably paints an ugly picture. These factors suggest that the business performance wouldn't really justify a high pay packet for the CEO. Shareholders might be interested in this free visualization of analyst forecasts.

Has Opthea Limited Been A Good Investment?

Most shareholders would probably be pleased with Opthea Limited for providing a total return of 100% over three years. So they may not be at all concerned if the CEO were to be paid more than is normal for companies around the same size.

In Summary...

Megan Baldwin is paid around the same as most CEOs of similar size companies.

We feel that earnings per share have been a bit disappointing, but it's nice to see positive shareholder returns over the last three years. So we think most shareholders wouldn't be too worried about CEO compensation, which is close to the median for similar sized companies. Taking a breather from CEO compensation, we've spotted 4 warning signs for Opthea (of which 2 are a bit unpleasant!) you should know about in order to have a holistic understanding of the stock.

Arguably, business quality is much more important than CEO compensation levels. So check out this free list of interesting companies, that have HIGH return on equity and low debt.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

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